The National Science Council (currently changed to be the Ministry of Science and Technology, MOST) set up the Hsinchu Science-based Industrial Park (HSIP), the first establishment of its kind in Taiwan, on December 15, 1980. By ushering in technologies and talent from abroad, bringing about the transformation of domestic conventional industry, and fostering the upgrade of industrial technology across the board, the park is intended to help high-tech industry take off in Taiwan.
Straddling the city and county of Hsinchu, the 6.5-square kilometer HSP now mainly houses semiconductor and optoelectronics ventures. More than 520 tenant companies employ more than 152,000 people. Over the years HSP companies have been approved to invest more than NT$1 trillion. The close dependence of tenant companies on the Industrial Technology Research Institute (ITRI), National Tsing Hua University and National Chiao Tung University is easily illustrated by the fact that more than 50 of them have emerged as spinoffs from the aforementioned institutions. The high concentration of high-caliber talent at the HSIP is only to be expected. Those who are devoted to R&D and technology development account for 40% of the HSP’s overall workforce, with the remaining 60% taken by people engaged in production, management, marketing, etc. In terms of educational levels, around 75% of HSP employees have junior college or higher degrees, which compares with 18% registered by Taiwan’s overall manufacturing sector. Some 63% of HSP employees own a university above diploma while the ratio is only 7% for the broader manufacturing sector. Additionally, more than 43,000 master’s degree holders and 3,500 with doctorate degrees now work at the HSP. Of the total, more than 4,000 have returned from abroad to start their own businesses in Taiwan.
As a science park sharing less than 0.04% of Taiwan’s land area, HSIP has generated an annual revenue of more than 40 billion USD over the past five years and enjoys a global reputation. It has cultivated a number of high-tech talent and global flagship IT enterprises over the past three decades, including, for example: The largest IC foundry provider TSMC, the second largest IC foundry provider UMC, the largest notebook PC and branded PC maker ACER, the third largest TFT-LCD maker CHIMEI INNOLUX, the fourth largest TFT-LCD maker AUO, the second largest mobile phone chipset maker and the fourth largest IC designer MediaTek, the third largest NOR Flash IC maker Macronix, and the largest Polymeric Positive Temperature Coefficient (PPTC) components manufacturer Polytronics Technology Corp. This has solidified the position of the HSIP in global IT industries. The Park also includes a number of renowned foreign companies, such as the largest plasma etching equipment maker Lam Research, the second largest IC equipment maker TEL, the third largest optical lens maker HOYA, etc. HSIP is constantly extending its industry capacity as well as competence in semiconductor, opto-electronics, information, and telecommunications industries. Thus, more than 70% of global IT industry products are initiated from companies at the HSIP.
It is clear that the Government uses HSIP as a vehicle to provide financial and infrastructure supports to emerging industries. In a sense, the government helped create an industrial district in the HSIP case. Nevertheless, as local firms compete in global markets, how could the dirigisme from the domestic developmental states meet the spontaneity of the transnational business networks? By and large, engaging in global production networks aligns local capitals with the interest of their international partners, and undermines their embeddedness in domestic state policies. Consequently, it adds ceilings on state’s leadership in intervening in firm’s activities, and forces the state to restructure itself to be better positioned in handling global connections. The role of ITRI has therefore shifted from that of “midwife” to that of coordinator, and the HSIP has transformed its role from a state-subsidized industrial zone to an endogenous-growth industrial district.
Almost half of the companies in the Science Park (97 companies) in 1997 were started by US-educated engineers, many of whom had considerable managerial or entrepreneurial experience in Silicon Valley (HSIP, 1998). The number of returnees increased rapidly after mid-1990s. Taiwan’s global links with the Californian technology hub unfold in several ways: Taiwan’s companies recruit overseas engineers, they set up listening posts in Silicon Valley to tap into the brain power there, or successful overseas engineers return to Taiwan to start up their own businesses. All of these possible links are established smoothly not on individualistic base, but with the mediation of overseas organizations, since the experienced engineers need to be able to integrate into local social networks to ensure gaining access to technology and market information and absorb them effectively (Hsu and Saxenian 2000).
More frequently the cross-regional collaborations involve partnerships between specialist producers at different stages in the trans-border production network. While Silicon Valley and Hsinchu remain at different levels of development and differently specialized, the interactions between the two regions are increasingly complementary and mutually beneficial. As long as the US remains the largest and most sophisticated market for technology products, which seems likely for the foreseeable future, new product definition and leading edge innovation will remain in Silicon Valley. However Taiwanese companies continue to enhance their ability to design, modify and adapt as well as rapidly commercialize technologies developed elsewhere. As local design and product development capabilities improve, Taiwanese companies are increasingly well positioned to take new product ideas and technologies from Silicon Valley and quickly integrate and produce them in high volume at relatively low cost.
The connection between Taiwan and Silicon Valley through the mediation of transnational ethnic-technical community is not unique. As China promotes high technology sectors, such as computer and semiconductor industries, the extension of Silicon Valley-Taiwan connections to China through attracting Taiwanese high technology investments becomes possible. Most Taiwanese PC firms chose PRD (Pearl River Delta) and YRD (Yangtze River Delta) as their destination. In fact, the locale of Taiwanese investments, particularly those high technology investments such as notebook computer and integrated circuit industries, has concentrated in the YRD region. It constituted a triangular manufacturing network between the buyers (in the US), the middleman firms (in the Hsinchu region) and the subcontracting firms (in the YRD region).
In the triangular manufacturing networks, the middleman firms in Hsinchu exploited the advantage of dense technical communities and complementary industrial structures with Silicon Valley and accumulated knowledge base in more than two decades of technological learning. In addition, the ethnic ties and cultural affinity between Taiwan and China enabled cross-border investment and made exploring the market in China relatively easy.
The case of HSIP demonstrates the interplay between the top-down developmental state and the bottom-up technical community in the governing of the global production networks. It was the demonstration effect made by the state to initiate high-technology industries to fill the manufacturer role in the early stage. However, the midwifery role became outdated as the innovative imperative from changing global production networks and a flexible technical community grown from the trans-border industrial development, became more influential.